The World This Week October 31 - November 4 - 2016

1. THE WORLD THIS WEEK
October 31 – November 4 , 2016

2. EQUITY VIEW

3. EQUITY VIEW
• There was some relief post the announcement made by the FBI with regards to the controversy where in the FBI
had found Hilary Clinton’s emails on a private server. The FBI announced that it had no reason to revisit its July
decision which had led to a sharp decline in Hilary Clinton’s Lead over Donald Trump which in turn had led to a
scare in the global markets.
• The announcement has given some relief across global markets and the Indian market was also seen opening. 8th
November happens to be the voting day and hence volatility in the markets can be expected. It is difficult to predict
what will happen however, investors must understand how to respond to whatever the outcome may be.
• Considering that Hilary Clinton might sail through, today and for a few hours tomorrow, markets might be positive.
However, some amount of volatility is also expected in the late hours of trading today and tomorrow.

4. EQUITY VIEW
• If Hilary wins there may be some jubilation in the markets, never the less, it all comes back to when the US Fed is
going to raise rates and how soon. However if trump wins then a lot of negative press and overreaction can be
expected because the entire media has been against Trump and to that extent they will portray as if the world has
come to an end.
• From an investors point of view it may be an excellent opportunity because that short window of gloom and boom
might present great opportunities. If we look at history Republicans have always been good for the stock markets.

5. EQUITY VIEW
• The basic difference in the approach of Democrats and Republicans is that Republicans believe in tax cuts and to
that extent they believe that cutting taxes would induce greater investment. Democrats on the other hand believe
in redistribution of income which means they are not big on tax cuts; instead they believe spending is going to lead
to economic growth. This has been the case with democrats in the white house for the last 8 years which was
disappointing because that was expected from them at least in the 2nd innings of Obama. But they ended up
spending on things like healthcare which have been hugely controversial.
• For the past thirty years it has been observed that when Republicans were in the saddle, the stock markets did
well rather it had been good for the markets. If Trump invokes fear and negative press it is a good time for
investors to buy.

6. EQUITY VIEW
• In the domestic market the results season has been lackluster. One was keenly looking at how the financial sector
would behave; performance of the banking sector has been horrible. Looking at the performance of some banks
such as Union Bank and Central Bank, there doesn’t seem to be any bottom for PSU banks.
• Banking continues to be a promising story in the long term perspective but approach is always to buy on declines
and never chase rallies. Banking happens to be high beta so when markets are going up banking performs better
than markets and it looks impractical if you are not part of banking and looks good if stock portfolio rises every day.
However, one must understand that it cuts equally ferociously the other way also. Thus banking is for the patient
investor who can wait and buy on declines.

7. EQUITY VIEW
• Inflation has hit a year low which is has given some comfort. This is largely due to base effect and with oil
dangerously purged around $50-55$ and with global events which can contribute to commodity rally one way or
another, it is too early to take a call on inflation.
• India at this point is a side show considering what is happening globally. There is pressure on bonds as well and a
lot of things are in the pause mode. One first needs to see what happens in the US presidential elections and then
one needs to see how policy shifts from monetary to fiscal.

8. NEWS

9. DOMESTIC MACRO
• Reserve Bank of India (RBI) issued draft guidelines on how Indian subsidiaries of multinational
companies can hedge their currency exposure risk in the country. According to RBI, subsidiaries looking
to hedge their exposure outside of exports and imports could do so through all foreign currency-rupee
derivatives, over-the-counter, and exchange-traded products.
• India moved a step closer towards rolling out a Goods and Services Tax (GST) next April after a council
of central and state finance ministry officials approved four main rate bands under the new sales tax. The
long-delayed tax, which would transform Asia's third largest economy into a single market, could boost
revenues through better compliance while making life simpler for business that now pay a host of central
and state levies.

10. GLOBAL MACRO
• British Prime Minister Theresa May will use her first bilateral trade trip since taking office
to try to boost ties with India before leaving the European Union. According to May's
office the visit would focus on breaking down barriers to trade and investment and paving
the way for a free trade deal as soon as possible after Brexit, which is not expected to
happen before 2019.
• The Bank of England scrapped its plan to cut interest rates, which it said could now move
up or down, and raised its forecasts for 2017 growth and inflation sharply due to the slide
in sterling since Britain's vote to leave the EU.
EURO

11. GLOBAL MACRO
• U.S. employers maintained a strong pace of hiring in October and boosted
wages for workers, which could effectively seal the case for a December
interest rate increase from the Federal Reserve. The solid labour market
fundamentals were also underscored by revisions to August and September
data, which showed 44,000 more jobs created than previously reported.
Average hourly earnings rose 10 cents or 0.4 percent in October.
• The U.S. labour market is close to full strength and the economy could at
some point overshoot the Federal Reserve's goals for employment and
inflation, according to Fed Vice Chairman Stanley Fischer.
UNITED STATES

12. GLOBAL MACRO
• China's services sector grew at the strongest pace in four months in October
as new business picked up, encouraging companies to hire more workers, a
private survey showed. Beijing is increasingly counting on the services
sector to create jobs and drive growth as it looks to shift its economic model
more toward consumption from a traditional reliance on investment and
exports.
• Activity in China's manufacturing sector expanded at the fastest pace in
more than two years in October, adding to views that the world's second-
largest economy is stabilising thanks to a construction boom. The official
Purchasing Managers' Index (PMI) stood at 51.2 in October, compared with
the previous month's 50.4 and above the 50-point mark that separates
growth from contraction on a monthly basis.
CHINA

13. INDICES
Date Sensex Midcap Auto Bankex CD CG FMCG HC IT Metals O&G Power Realty Teck
01/11/2016 27,877 13,441 22,275 22,250 12,786 14,825 8,446 16,335 9,913 10,663 12,315 2,019 1,546 5,466
02/11/2016 27,527 13,194 22,033 21,993 12,737 14,659 8,378 15,985 9,803 10,578 11,976 2,001 1,513 5,404
03/11/2016 27,430 13,015 21,991 21,917 12,633 14,592 8,389 15,808 9,726 10,509 11,756 1,981 1,493 5,376
04/11/2016 27,274 12,840 21,810 21,781 12,430 14,342 8,507 15,150 9,790 10,256 11,690 1,959 1,457 5,393
-2.16% -4.48% -2.09% -2.11% -2.78% -3.26% 0.73% -7.25% -1.24% -3.82% -5.08% -3.01% -5.80% -1.34%

14. COMMODITIES AND CURRENCY
Date USD GBP EURO YEN Crude (Rs. per BBL) Gold (Rs. Per 10gms)
31/10/2016 - - - - 3256.00 30049.00
01/11/2016 66.71 81.56 73.18 63.68 3133.00 30551.00
02/11/2016 66.83 81.89 73.95 64.37 3114.00 30477.00
03/11/2016 66.69 82.25 74.15 64.95 3030.00 30598.00
04/11/2016 66.72 83.14 74.05 64.62 2979.00 -
-0.01% -1.93% -1.20% -1.48% 8.51% -1.83%

15. DEBT
Tenor Gilt Yield in % (Friday) Change in bps (Week)
1-Year 6.59 13
2-Year 6.55 -1
5-Year 6.73 2
10-Year 6.84 -5

16. KIASL TEAM
Shantanu Awasthi
Head- Advisory
Shantanu.awasthi@Karvy.com
Nupur Gupta
Lead Advisor
Nupur.gupta@Karvy.com

17. DISCLAIMER
The information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock Broking Limited) or other Karvy Group companies. The information contained herein is based on
our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for
any loss incurred based upon it.
The investments discussed or recommended here may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial
position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned here, investors may please note that neither Karvy nor any person
connected with any associated companies of Karvy accepts any liability arising from the use of this information and views mentioned here.
The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-mentioned companies from time to time. Every employee of Karvy and its associated
companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in
purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders
only through Karvy Stock Broking Ltd.
The information given in this document on tax are for guidance only, and should not be construed as tax advice. Investors are advised to consult their respective tax advisers to understand the specific tax
incidence applicable to them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force – this could change the applicability and incidence of tax on investments
Karvy Private Wealth (A division of Karvy Stock Broking Limited) operates from within India and is subject to Indian regulations.
Karvy Stock Broking Ltd. is a SEBI registered stock broker, depository participant having its offices at:
702, Hallmark Business plaza, Sant Dnyaneshwar Marg, Bandra (East), off Bandra Kurla Complex, Mumbai 400 051 .
(Registered office Address: Karvy Stock Broking Limited, “KARVY HOUSE”, 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad 500 034)
SEBI registration No’s: ”NSE(CM):INB230770138, NSE(F&O): INF230770138, BSE: INB010770130, BSE(F&O): INF010770131,NCDEX(00236, NSE(CDS):INE230770138, NSDL – SEBI Registration No:
IN-DP-NSDL-247-2005, CSDL-SEBI Registration No:IN-DP-CSDL-305-2005, PMS Registration No.: INP000001512”